Matrix’s 9MFY21 core PATMI of RM181.5m (+1.6% YoY) was above our and consensus expectation. The improved progressive earnings recognition in 9MFY21 is largely attributed to expedited construction progress and higher new property sales. 9MFY21 sales of RM865m (79% of full year target) was recoded while launches worth RM420m were carried out. We increase our forecast by 10.6%/2.2%/1.9% for FY21/22/23 to account for higher progressive billings recognitions and higher sales. Maintain BUY with a marginally higher TP of RM2.12 (from RM2.11) based on 35% discount to RNAV of RM3.27.

Above expectations. Matrix reported 3QFY21 core PATMI of RM75.3m (+0.4% QoQ, 15.3% YoY), bringing 9MFY21’s sum to RM181.5m (+1.6% YoY). The results were above expectations forming 87% of our and consensus full year forecasts, attributable to expedited construction progress and higher new property sales.

Dividend. Declared third interim dividend of 3.0 (3QFY20: 3.0) sen per share going ex on 24 Mar 2021, bringing 9MFY21 dividends to 8 sen per share.

QoQ. Top line increased by 20.4% attributable to higher progress billing recognition in addition to higher sales. Nonetheless, core PATAMI was flattish (+0.4%) on the back of higher COGS (+60.3%) and higher other expenses (+42.9%).

YoY. Revenue rose by 13.1% on the back of improved progress billing recognition. Notwithstanding the lower gross profit by 4.2% from lower margin products, Matrix’s core earnings increased by 15.3% thanks to reduced administrative and general expenses as well as higher share of results from the its JV-co in Indonesia.

YTD. Core earnings fell by 8.7% largely due to the loss of operations during the MCO period in 1QFY21 (impacted Apr month) but this was partially mitigated by lower selling and marketing expenses as well as administrative expenses. In turn, core earnings were flattish (1.6%).

Strong sales recorded. 3QFY21 new sales came in at RM263m, bringing 9MFY21 sales to RM865m which represents 79% of the full year target (RM1.1bn). With regards to launches, 3QFY21 launched RM420m worth of products bringing 9MFY21 launches to RM773.2m.

Outlook. For 4Q21, management is targeting to launch RM252.4m worth of GDV coming from Tiara Sendayan 7, Nusari Bayu 2 and Laman Sendayan 3. We believe Matrix’s FY21 sales target of RM1.1bn (+6% YoY vs FY20) is achievable (despite the pandemic) given the encouraging response in recent quarter (81.9% take up rate in 3Q21 achieved). Earnings visibility will continue to be supported by new sales and unbilled sales of 0.8x cover (RM963m). In terms of dividend, we projected Matrix to be able to pay at least 11 sen per share for FY21 (40% dividend payout ratio) which translates to a yield of 6.1%. Furthermore, Matrix’s healthy balance sheet of 0.04x net gearing (3Q21) will provide the buffer to sustain through this challenging environment.

Forecast. We increase our forecast by 10.6%/2.2%/1.9% for FY21-23 to account for higher progressive billings recognitions and higher sales. Maintain BUY with a marginally higher TP of RM2.12 (from RM2.11) based on 35% discount to RNAV of RM3.27 as we make changes to our earnings base. We continue to like Matrix as it is well-positioned to ride on affordable housing theme within its successful townships with cheap land cost and sustained property sales. This is supported by an attractive dividend yield of 6.1% for FY21 and 7.0% for FY22, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 26 Feb 2021